Opinions
Norman Levine
Great West Lifeco
GWO-T
HOLD
Mar 21, 2014
Stock price when the opinion was issued
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Revenues from asset management, insurance, annuities, health benefits. Very diversified. Around for decades. Likes the safety and growth over time. Dividend growth is about 8%. Payout ratio still in 50-70% range. High quality. Not necessarily a home run, but a single: core holding for the long term, dividend payments, some price appreciation. Yield is 4.6%.
Because it's diversified, interest rate moves benefit different segments at different times.
All the insurance names, both in Canada and the US, continue to work. If interest rates do, in fact, go higher, that will only be beneficial for lifecos and other insurers. The chart looks fantastic. Good run, so there is some weakening in the intermediate term.
If a long-term holding, best thing you can do is sit on your hands and do nothing except participate in the DRIP program. Especially if he's right on the broader call of rates being 8-10% in the secular bear market of 2030-40, should be a big tailwind for insurers.
Likes the life insurance area in Canada better than the bank area because their interest-rate sensitivity is greater. When interest rates go up, they are huge beneficiaries. Also, feels they have much greater earnings growth potential. Banks have some pretty big headwinds. This lifeco is a little bit different because it recently bought Irish Life, which exposes it more to the European market. There is some confusion here, but this weekend Britain came out with some new standards as far as annuities go in England and they are a big player in that. He has seen some research reports that go both ways that it is either positive or negative for them and he is not quite sure what the answer is.